Solar Installations: Hidden Risks for Tenants

Leasing an industrial space with a rooftop solar installation can feel like navigating a minefield.

The promise of energy savings is enticing, but the potential costs of maintaining or replacing the roof beneath those panels can catch tenants off guard.

With solar leases often outlasting your tenancy and roof membranes facing accelerated wear, getting the lease terms right is critical.

In this newsletter, we dive into how to protect your financial interests when signing a lease for a building with a pre-existing solar setup.

From crafting ironclad lease clauses to leveraging negotiation strategies, we’ll equip you with the tools to minimize liability and secure a fair deal.

Whether you’re locking in a 10-year lease or eyeing renewal options, these insights will help you stay ahead of the curve.

Safeguarding Your Lease Against Roof and Solar Costs

Source: SolarSmiths.

The Solar Challenge

Rooftop solar panels, while eco-friendly, add complexity to industrial leases. The solar company’s lease with your landlord—often spanning 15 years or more—means their maintenance crews, equipment weight, and panel installation/removal can stress the roof membrane. This accelerates wear, potentially requiring repairs or a full replacement during your tenancy. Understanding this risk is key to negotiating a lease that doesn’t saddle you with unexpected costs.

Critical Lease Provisions

To shield yourself, ask your attorney about prioritizing these five lease clauses:

1. Maintenance Duty: Ensure the landlord handles all routine roof maintenance—inspections, cleaning, and minor repairs—unless you directly cause damage.
2. Replacement Costs: Stipulate that the landlord covers 100% of roof replacement costs, including expenses tied to solar panel removal or reinstallation.
3. No Depreciation Liability: Reject clauses tying you to roof replacement costs based on depreciation or amortization schedules.
4. Solar Safeguards: Require the landlord to guarantee that solar activities won’t damage the roof or disrupt your operations, with indemnification for any resulting costs.
5. End-of-Lease Clarity: Specify that you’re not responsible for restoring the roof at lease-end, except for damage you’ve caused, and reserve the right to an independent roof inspection.

Negotiation Playbook

Maximize your leverage with these strategies:

• Demand a Roof Condition Report: Request a professional inspection before signing to establish the roof’s baseline condition and lifespan.
• Scrutinize the Solar Lease: Review the landlord’s agreement with the solar provider to clarify their roof maintenance obligations.
• Tweak Net LeaseTerms: In Net leases, carve out roof replacement and solar-related costs from your responsibilities.
• Cap Contributions: If the landlord pushes for cost-sharing, propose a fixed annual cap (e.g., $5,000, inflation-adjusted) or seek rent concessions to offset costs.
• Engage Experts: Hire a commercial real estate lawyer and roofing consultant to draft precise terms and estimate future costs.

Extra Layers of Protection

• Insurance: Confirm the landlord’s property insurance covers the roof and solar system, naming you as an additional insured.
• Warranties: Ensure access to existing roof warranties isn’t compromised by solar activities.
• Subrogation Waiver: Include a mutual waiver to prevent insurance claims against you for roof issues beyond your control.

**The entirety of this newsletter is for general informational and educational purposes only. Please consult a qualified commercial real estate attorney or other third-party to assist you in drafting an appropriate clause or lease agreement as each situation is unique and requires tailored advice. The author is released from any perceived or actual damages.**

Solar on Warehouses. Source: Environment America.

Conclusion:

Signing a lease for an industrial building with a rooftop solar installation requires vigilance to avoid costly surprises. By embedding protective clauses, negotiating strategically, and securing expert support, you can limit your exposure to roof maintenance and replacement costs.

Don’t let the landlord’s solar deal become your financial burden—take control of the lease terms to safeguard your business. If you’re facing a lease negotiation, consult a commercial real estate attorney or roofing specialist to tailor these strategies to your property.

Have questions or need more tailored advice? Let us know—we’re here to help you navigate the process and are happy to refer you to the appropriate professionals.